PIA Testifies on Health Insurance Issues at Hearing of House Small Business Committee

WASHINGTON, May 24, 2007 - What drives the availability of health insurance among small businesses is cost, according to the National Association of Professional...

May 24, 2007

PIA member Steven J. Harter, testifying beforethe House Small Business Committee on May 24,2007.

WASHINGTON, May 24, 2007 - What drives the availability of health insurance among small businesses is cost, according to the National Association of Professional Insurance Agents (PIA). Testifying at a hearing before the House Small Business Committee, PIA member Steven J. Harter said group health coverage is not hard to find, but finding it at a cost that is affordable to small businesses is the major challenge.

Harter, an insurance agency owner from Ava, Missouri, recounted that until late last year he owned another company not related to his insurance business. He said that company merged with a larger organization, partly because of the incredible cost of health insurance for his employees.

A past national President of PIA, Harter was one of five witnesses asked to testify at the committee's legislative hearing entitled, "Expanding Small Business Health Insurance Coverage Using the Private Reinsurance Market."

"The overwhelming driver of insurance cost is the high demand for medical services coupled with the skyrocketing costs of health care, including prescriptions," Harter said. "Today as a nation, we are healthier than ever before. Part of the reason are the advances in medical treatment, which of course add to the cost."

"I do not see that reinsurance will necessarily help curb costs," Harter said. "I see reinsurance as more of a vehicle for availability. I have always been able to find group health insurance, just not able to afford it. I don't get the impression from my clients that they are unable to find coverage."

Harter said that on the broad question of making health insurance more affordable, there are only three broad options - either have the government pay part of the cost, somehow limit the cost of services, or pass more of the cost to individuals (or some combination thereof). "All reinsurance does is redistribute the exposure to loss by the insurance company," he said. "It does not lower the total cost. However, the ability of insurance carriers to lower their overall exposure to loss through reinsurance could result in more companies competing in the marketplace. With more competition, insurance costs could potentially be lowered."

Harter said PIA had several recommendations as Congress begins to consider crafting legislation:

1. Consider affordability as the key to availability.

2. Clearly outline administration of the program, preserving state regulation.

PIA members have been adamant supporters of state-based regulation of insurance since our creation in 1931. We commend the Small Business Committee for continuing to rely on the states for administration and oversight of the program.

PIA believes state coverage mandates must remain.

3. Establishing financial soundness standards including a structure of operative disciplines is critical. It is not enough to merely have funding.

4. Learn from past mistakes. PIA continues to have reservations about Association Health Plan (AHP) proposals that too closely or fully build their structure adhering to ERISA, without including the lessons learned from all the adverse and unintended consequences that continue under it. ERISA needs to be fixed before anything else is piled on top of it.

5. PIA strongly advises that there be specific reporting dates to the Committee for further public vetting - and that before the concepts are implemented, they are subjected to economic and operative modeling. Through this modeling process, the Committee can better identify the hidden details that are always present - and how the structure might act in different markets.

6. Have a consistent definition of what constitutes a small business for purposes of legislation.

"What we are really discussing here today is how to go about delivering more high-quality health care to people who cannot afford to bear the full brunt of the cost," Harter said. "People who choose to work for America's small businesses should not be less able to have quality health care than people who work for larger concerns. Aside from the issue of basic fairness, such a situation places small businesses at a competitive disadvantage in the marketplace."

"All of us must work together to craft solutions that will expand access to quality, affordable health care to America's small businesses and the people they employ," he added.

Testifying along with Harter at the May 24, 2007 hearing were: Leonard D. Crouse, deputy commissioner of the captive insurance division of the Vermont Department of Banking, Insurance, Securities & Health Care Administration; Patrick L. Collins, vice president and reinsurance underwriter with Munich Re HealthCare; Janet Trautwein, executive vice president of the National Association of Health Underwriters; and Edmund Haislmaier of the Heritage Foundation.

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street America(SM). PIA's web address is www.pianet.com.